Following the rebuilding of the line, the McEwans realized that it would be in their best interest to have a connection with a second large railroad in addition to the Lackawanna. The McEwan brothers organized the Whippany & Passaic River Railroad to build a line from Whippany east to Essex Fells in Essex County where it connected to the Roseland Railway, a branch of the Erie Railroad. Construction on the 7-mile extension was started in the Spring of 1903. On August 28, 1903, both the Whippany River Railroad and the Whippany & Passaic River Railroad were consolidated to form the 11-mile long MORRISTOWN & ERIE RAILROAD COMPANY (M&E). The final spike was driven on May 3, 1904. On that day, the first M&E passenger train arrived in Essex Fells.

Of the seven McEwan brothers, Richard W. McEwan had taken the most interest in the operations of the Whippany River R.R. In 1896, Richard was made General Freight Agent. In 1897, he assumed the title of Superintendent & Secretary, and oversaw most of the rebuilding of the WRRR. When the M&E was formed in 1903, he became its first president and promoted the new line whenever he could. During Richard's administration, until he died in 1936, the railroad continued to grow and prosper.

The Morristown & Erie's passenger service was a small, local affair. From the beginning, one old, second-hand combination baggage/passenger car, hauled by one of the M&E's diminutive steam locomotives, was sufficient to carry passengers over the 11-mile route between Morristown and Essex Fells several times each day. Mill workers rode to Whippany, while shoppers traveled to Morristown. The commuters that worked in New York City were transported to Essex Fells where they transferred to an Erie Railroad connecting train to Jersey City and the quick, pleasant ferry boat ride across the Hudson River to Manhattan.

In the mid-1910s, the Morristown & Erie's expenses of operating its local passenger service continued to rise, as revenue derived from this service declined. In 1917, M&E President Richard McEwan decided to supplant the short, but expensive, steam-powered passenger trains with a small, gasoline-powered railbus manufactured by the White Company. From all accounts, it appears that Railbus No. 10, which went into service on the M&E in July 1918, performed admirably and fulfilled all of the Railroad's expectations.

No. 10 hauled passengers on the M&E for nearly 10 years and averaged eight trips per day. Although patrons seemed to appreciate the service provided by the railbus, continued and aggressive competition from automobiles and motor buses eventually put an end to the M&E's passenger service on April 29, 1928.

On the freight side, however, the railroad operated successfully for nearly 75 years under the direction of the McEwan family. During their era, the McEwans created a paper dynasty and provided community residents with respectable employment that was passed on from generation to generation. For many years, a large sign not far from the Whippany station proudly stated: "Whippany Makes Paper... Paper Makes Whippany." Undeniably, paper made the Morristown & Erie.

Despite its small size, the M&E was always considered to be one of the most profitable railroads in the country. Indeed, in September 1940, the McEwan-led stockholders announced that they were paying off their last bond. The M&E was the only U.S. railroad to rid itself of all debt during the Great Depression.

Since 1965 the Whippany Railway Museum is dedicated to Preserving the Heritage and History of the Railroads of New Jersey through the Restoration, Preservation, Interpretation and Operation of Historic Railroad Equipment and Artifacts from New Jersey and the immediate vicinity